CBS cuts its outlook, to take $14 billion charge

JohnLetzing

SAN FRANCISCO (MarketWatch) -- CBS Corp. said Friday it's cutting its outlook for the year and will take a $14 billion charge, citing a troubled advertising market. Following the news, its stock dropped more than 20%.

CBS
CBS, -0.02%
said in a prepared statement that, "The continued economic slowdown in the United States has adversely affected advertising revenues across the company's businesses."

CBS said it now expects its third-quarter earnings excluding special items to be between 42 and 44 cents a share, compared to 51 cents a share in the same period a year earlier. The company said it expects revenue growth in the period ended in September to be 3% compared to the period a year ago.

Analysts on average have been estimating CBS would post third-quarter earnings excluding special items of 46 cents a share, and $3.4 billion in revenue.

CBS said it will take a $14 billion charge for its third quarter, "to reduce the carrying value of goodwill, intangible assets related to FCC licenses and investments."

Like other large media companies, CBS owns a number of TV and radio stations, which have seen their market values dip well below their book values, requiring CBS to note the discrepancy and write down the difference.

However, CBS added that "the company continues to generate significant free cash flow and expects to maintain its current dividend policy."

Less than a month ago, at a Goldman Sachs conference, Chief Executive Les Moonves was typically upbeat, saying that ad sales at the CBS network are stronger than many people had anticipated, and that the company would be well-positioned to benefit once the economy begins to recover.

CBS said it will provide more detailed information when it reports earnings on Oct. 30.

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